Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week higher, boosted by improved sentiment among investors over the agreement reached by the eurozone leaders and the robust export demand.
The benchmark FCPO January contract jumped RM89 or 3.09 per cent to close at RM2,972 per tonne on Friday from RM2,883 per tonne last Friday.
The trading range for the week was from RM2,875 to RM3,007.
Total volume traded for the week amounted to 118,855 contracts, down 20,404 contracts from the previous week.
The open interest as at Thursday decreased to 129,162 contracts from 138,673 contracts the previous Thursday.
Eurozone leaders managed to get a deal with private banks and insurers on Thursday to write down a 50 per cent loss on Greek government bonds.
Earlier, the leaders also agreed to boost the emergency bailout fund, the European Financial Stability Facility (EFSF), to about euros one trillion.
The global equities and commodities immediately reacted to the news with sharp increase mostly from two per cent up to six per cent on Thursday.
The worries over eurozone debt crisis worsening were temporary eased off.
After the eurozone leaders successfully jumped over the hurdle this week, there would be another hurdle to overcome next week when the G20 leaders meet in Cannes, France on November 3 and 4.
Palm oil market sentiment was also improved as the production in October was expected to rise only three to four per cent instead of the previous estimation of a 10 per cent increase.
Once the peak production month of September and October has passed, palm oil production would enter a seasonal weak output at the end of the year during rainy season.
Should the La Nina effect start to kick in during the first half of 2012, this would further slow down the palm oil production growth which would be supportive to palm oil prices.
Meanwhile, the export demand was robust as the actual figure came in well above market expectations of around 1.25 million tonnes.
Cargo surveyor ITS released the palm oil export figures for the period of October 1 to 25 on Tuesday at 1,395,935 tonnes, an increase of 16.38 per cent while another surveyor SGS at 1,366,499 tonnes, a rise of 13.48 per cent from the same period last month.
Technical View
The benchmark January contract had successfully penetrated above EMA 50 on Thursday in tandem with the relief of eurozone debt crisis.
As such, the low of RM2,754 established on Oct 6, 2011 would be the low of the current bear market.
Palm oil market probably would still be consolidating at current range but it is forming a solid support base here and ready to stage for a rally next year.
Resistance would be pegged at RM3,016 and RM3,095 while support was set at RM2,917 and RM2,850.
Major fundamental news this coming week
Malaysian export data for Oct 1 to 31 will be released by ITS and SGS on October 31.
The market expectation for the export figure in October was 1.64 million to 1.65 million tonnes.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my.
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